Escrow & TitleIntermediateCalifornia Exam

A preliminary title report (prelim) is ordered in escrow primarily to:

ADetermine the property's market value, as typically handled by an escrow officer

BIdentify all liens, encumbrances, easements, and conditions affecting the property's titleCorrect

CInspect the physical condition of the property, consistent with standard title insurance practice

DCalculate property taxes owed, per customary closing procedure in California

Why Identify all liens, encumbrances, easements, and conditions affecting the property's title Is Correct

Answer B: Identify all liens, encumbrances, easements, and conditions affecting the property's title

A preliminary title report discloses the current state of title, including all liens, easements, encumbrances, covenants, and conditions. It allows all parties to identify and resolve title issues before closing.

Exam Tip: Escrow & Title

Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.

Key Escrow & Title Terms in This Question

Easement

A non-possessory right to use another person's land for a specific purpose.

Encumbrance

Any claim, lien, charge, or liability attached to real property that affects its value or limits its use.

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

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Key Terms to Know

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.